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On what grounds can you be disqualified as a director?

Director disqualification is more serious than simply losing your job. The repercussions can substantially affect other parts of your life. For example, you will not be able to become a director of another company, or be substantially involved in the setting up or management of another company without the prior written consent of the court. This period of disqualification lasts 15 years.

Disqualification does not stop you from being employed by a company. The only issue is if you want to act in a management capacity in the company. You will also face problems with professional bodies and it is likely that you will be banned from being a member. Additionally, you will not be able to hold positions like governor of a school or trustee of a charity. 

You won’t be disqualified as a director simply for your business failing. There must be some wrong doing that fits the categories described below. Additionally, your business does not need to be failing to disqualify a director. As soon as you are aware of or participate in any misconduct then you are at risk of disqualification. 

The grounds for which you can be disqualified as a director are as follows:

Wrongful Trading

Wrongful trading is where the business continues trading and incurring liabilities even after insolvency. The business is therefore unable to pay off their debts but continue incurring new liabilities. In this situation there is no intention to defraud creditors, it is simply a case of poor judgement on behalf of the director.

Even though there is no bad intent, wrongful trading is still grounds for director dismissal because it shows poor judgement on behalf of the director to an extent that disqualification is necessary.

Unfit Conduct

This category is very wide and can cover all sorts of factors. The most common factors include using the company’s assets for your own person benefit. This is really a catch all provision that is used when the director has displayed conduct that makes them unfit for their post, but it does not fit into any of the other categories.

Not adhering to the filing rules in the Companies Act 2006

As any director or official of a company will know, the Companies Act 2006 sets out mandatory filing rules for Companies House. If you do not comply with the filing rules you will be fined in the first instance. If you are repeatedly refusing to comply with the filing rules then you will risk being disqualified as a director. 

This involves more than simply being late with your filing. If you are late you will be fined, however, if you have not filed anything at Companies House for several years then you will risk disqualification.

Failure to comply with Competition Law

Competition law is designed to give a level playing field for all companies to compete fairly with each other. Failure to comply with competition law is an offence that is taken very seriously. In the first instance your company will receive fines. These can be very large fines depending on the seriousness of the breach. If you continue in breach of competition law then you face disqualification.

Call our experienced solicitors in Manchester 0161 820 8888 or call 0208 889 8888 for our solicitors in London. We will happily provide a free 30-minute consultation on your matter. Give us a call today!

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